ATLANTA — United Parcel Service Inc. reported a 13% drop in first-quarter profit, to $965 million, as stay-at-home orders generated deliveries to people’s homes but not enough to offset the higher costs and a drop in business deliveries.
UPS said Tuesday that the coronavirus outbreak has created “significant headwinds." The package-delivery company withdrew forecasts about future revenue and profit, saying it couldn't predict the depth or duration of the pandemic's impact on its business.
The company said it expects to cut capital spending this year by $1 billion and it is suspending share buybacks, reducing planned full-year spending on buybacks by $783 million.
The growth of stay-at-home restrictions meant the closure of many businesses that form the core of UPS' customer base. Supply chains that also generate delivery business were disrupted. UPS said commercial ground deliveries are down sharply.
Instead, the company has seen a shift to less profitable residential deliveries — now 70% of its U.S. volume — which are more costly for UPS because of the greater distances drivers must travel between stops.
UPS said net income dropped from $1.11 billion a year earlier. The Atlanta-based company said first-quarter profit, after excluding non-recurring costs, was $1.15 per share.
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That fell short of Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was $1.21 per share.
UPS said revenue rose 5% to $18.04 billion, topping analysts' forecasts. Six analysts surveyed by Zacks expected $17.42 billion.
Shares of UPS fell 5.1% to $97.34 in morning trading.
The shares have declined 12% since the beginning of the year, while the Standard & Poor’s 500 index has decreased 11%. The stock has declined slightly more than 2% in the last 12 months.